November 4, 2020; New York Times and Los Angeles Times

It was the best initiative $205 million could buy, with Uber, Lyft, Instacart, and DoorDash forking over most of the cash in the most expensive initiative campaign in US history. Given that California is home to an estimated one million gig ride-hailing service workers, that expenditure works out to about $205 per worker.

And now, the voters of California, by a 58-percent majority, have given their assent to creating a new, highly permissive labor law regime that allows gig economy companies to continue treating drivers as independent contractors, vitiating state law and a state supreme court decision that had said otherwise.

Uber, Lyft, Instacart, and DoorDash designed the measure to exempt themselves from a state labor law that would have compelled them to treat their drivers as employees and cover standard employee costs for healthcare, unemployment insurance, and other benefits.

New York Times reporter Kate Cougar adds that, “As a concession to labor advocates, the initiative offers a wage floor and limited benefits to drivers.” But the benefits are less than they appear. Writing in the Los Angeles Times, Taryn Luna reports that the legislation “requires the companies to provide an hourly wage for time spent driving equal to 120 percent of either a local or a statewide minimum wage. It also requires that drivers receive a stipend for purchasing health insurance coverage when driving time averages at least 15 hours a week, a stipend that grows larger if average driving time rises to 25 hours a week.”

But, Luna adds, “work hours only include time spent driving to, picking up and carrying a rider, or delivery to a destination, not the time spent waiting in between trips. The measure’s passage means workers for ride-hail and delivery companies will receive weaker benefits than they would have under a state law approved last year.” A University of California, Berkeley labor center study found that when full time spent working (including wait time) was counted, the guarantee amounts to $5.64 an hour, less than half the state minimum wage.

L.A. Times business columnist Michael Hiltzik, who noted, as NPQ has before, that the ride-hailing firms effectively have employed a classic business strategy of pricing services below cost (and thereby being able to earn monopoly profits after competitors are driven out of business), was caustic in his denunciation of the measure.

The work environment may never be the same, in not a good way at all.

The bottom line is that these money-losing companies secured themselves the latitude to keep scratching after elusive profits by exploiting workers by sticking them with expenses including fuel, vehicle upkeep, and insurance, while denying them compensation and unemployment benefits, the assurance of a living wage, and the right to unionize.

Even worse, they immunized themselves from legislative oversight by writing in a provision requiring a seven-eighths vote of the membership of both legislative chambers to alter Proposition 22. That’s an almost insurmountable threshold.

On Wednesday, after the election result was announced, Uber’s stock price climbed more than 14 percent, and Lyft’s was up more than 11 percent at the close of trading. Uber’s stock market capitalization as of Wednesday’s stock market close was $71.84 billion, rising from $35.27 to $40.66 a share. The 14.59-percent climb in value implies an increase in company value of $9.15 billion in a single day. Not a bad return for its estimated $57 million-plus investment in campaign expenditures.

Cougar notes the obvious national implications: “With the gig work model cemented in California, Uber and other gig economy companies are expected to pursue federal legislation that would protect them from similar employment laws in other states.”

And just in case you think Cougar is engaging in idle speculation, Tony Xu, CEO of DoorDash, confirmed in a written statement that this is exactly what the gig employers want to do: “Now, we’re looking ahead and across the country…we look forward to partnering with workers, policymakers, community groups, and more to make this a reality.”—Steve Dubb